Pretoria residents feel the pinch as living costs rise

“It is a common misconception in the public that if fuel prices increase then everything becomes more expensive.”

Senior economist at Efficient Group Dr Francois Stofberg said to have an understanding of the cost of living you cannot view it on a month-to-month basis.

“It is partially true because everything must be transported in South Africa. But, I think the impact of fuel prices is taken out of proportion because they only make a small share of the average household expenses,” he said.

Stofberg explained that on average in the more urban areas in South Africa, the average household spends about approximately 5% of their monthly income on fuel. In less-privileged households, the fuel and transport costs are approximately 7%.

“It can be seen as a large portion but it really is only a small percentage of a salary. Unfortunately, fuel prices will continue to increase in the medium term which is the next two to three years because of the war in Ukraine and until that is resolved in either direction,” he said.

“This is a process that will be withdrawn for about 6-12 months and during that time the farmers won’t be able to plant as they would usually be able to so food prices are definitely going to increase,” Stofberg stated further.

Household expenses

A household affordability index in May 2022 shows that the average cost of the household food basket is R4 609,89. It has increased by R66.96 (1.5%), from R4 542,93 in April.

Giving a perspective of the household expenses Stofberg said that food is a larger portion of the household expenditure. The two components that are now increasing are how we can understand the cost of living.

Furthermore, he said the larger portion of an individual’s salary will probably go to things like rent, cars and insurance.

“Those things are increasing but not as much. Interest rates are increasing but on a percentage basis. Those increases aren’t the type of increases that we see necessarily with the food prices, etc.”

Stofberg notes that some things are actually becoming cheaper. The difference is some things are becoming relatively cheap.

“So, the price of some things in certain seasons or when there is an oversupply of red meat, then white meat is relatively cheaper. What we are usually seeing is individuals start substituting towards different meat types, fruit and vegetable types, or lower quality meat cuts,” he said.

“Certain things that the household spends on become cheaper, for example, technology. You can buy a laptop for cheaper now than you could 10 years ago. And relatively we can cut down on some of our expenses to cut down our cost of living. “

But what happens to inflation?

Stofberg said there is an expectation for inflation to increase but not to spiral out of control. With the guidance of the South African Reserve Bank, the expected inflation rate will only touch 6% this year. That is inflation on an annual level.

“So, if we take all the increases in prices and average them then we will get closer to 6%. However, this doesn’t mean that you are not spending an extra 30% on fuel, it is just that other things have not increased as rapidly,” he said.

Stofberg explained that there are ways of mitigating the inflation rate.

“In general, I would say consumers are under a severe amount of pressure because certain items are becoming a lot more expensive, but you have to look past the emotions and look at the actual income statement of the household,” he said.

“There is pressure because unemployment is increasing which means the total amount of money coming into the economy is being reduced. So, the cost of living may not be increasing as much, but the total income in the economy is going down.

“There are more people who have less money. That’s the problem, but it is not necessarily an inflation problem.”

The consumers

Speaking to Rekord, consumers in the east of Pretoria shared how they are navigating the cost of living.

Jullian Harrison who works in marketing and communications said, “I have been cutting down on insurance and alcohol to manage my finances. The rest we are still consuming and buying, we can’t stop pouring petrol.”

Ashleigh Oliver, a pre-primary school teacher, said coming out of Covid the financial increase was straining everyone.

“I have moved in with my sister just to cut the cost of living on my own. We combine our funds and make it work.”

Onica Gwebu who is self-employed said, “Instead of buying biscuits at the store, I rather bake them. If the delicacy can be made at home then I do that”.

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